Ask me about my blockchain oracle
DeFi is no longer an Ethereum-only territory, as more blockchains offer scalability and liquidity. Solana is one of the standouts among them.
A post-“DeFi Summer” gem
The rise of decentralized finance (DeFi) has led to an explosion of new blockchain networks. Having originally emerged on Ethereum, the DeFi sector has grown significantly since summer 2020, and is now represented on other chains like Binance Smart Chain, Polygon and Karura, among others. Unlike Ethereum at its current stage, these chains are less prone to congestion and therefore offer much better scalability, helping developers to unlock more possibilities for DeFi. They also make the sector more inclusive to retail investors who can’t afford pay several hundred dollars worth of ETH fees just to do a couple of simple transactions on Uniswap or other DeFi service built on Ethereum.
Among those newer chains is also Solana (SOL) – an open-source project built around a high-performance, permissionless Layer-1 blockchain. Its underlying technology originated in November 2017, when Anatoly Yakovenko published a whitepaper describing Proof-of-History (PoH), a mechanism that can provide a way to cryptographically verify passage of time between two events and therefore does not rely on validators to confirm those events. In short, PoH’s design allows Solana to enhance its network’s speed and capacity.
In 2021, Solana has been attracting a lot of investors’ attention against the backdrop of Ethereum’s congestion issue. In particular, Solana’s market cap has soared significantly, from $500 million in early January to nearly $8 billion as of today, while the total value locked in Solana’s ecosystem broke $1.4 billion in June this year.
8 unique features for optimal decentralization/security balance
So what makes Solana so suitable for building dApps? As per the PoH mechanism, its proprietary runtime can process smart contracts in parallel mode. In other words, Solana has the ability to process and store data at high speed while using enhanced consensus protocols at all levels to ensure top-grade security.
Further, Solana introduces new solutions that remove complications related to hardware components like SSDs, CPUs, and GPUs to improve overall network performance. It also uses horizontal scaling and can store petabytes of data that are rapidly accessible.
Solana transaction flow chart
In total, there are eight novel technologies that enable Solana’s ability to maintain its decentralized and permissionless nature in such a unique way:
- Proof-of-History (PoH) – an algorithm that boosts the network’s efficiency by enabling it to keep track of historical records.
- Tower BFT – a consensus mechanism that leverages PoH to reduce communication overhead and latency.
- Turbine – a protocol that makes it easier to transmit data by breaking it into smaller packets.
- Sealevel – a hyper-parallelized transaction processing engine used to allow transactions to run concurrently on the same state blockchains.
- Gulf Stream – a protocol that enables transaction execution ahead of time, reducing the confirmation period.
- Cloudbreak – a data structure designed for concurrent reads and writes across the network.
- Archivers – a node network storage that receives data offloaded from validators.
- Pipeline – a transaction processing unit for validation optimization.
Solana vs. other blockchains
As DeFi has been largely dominated by Ethereum, the Ethereum Virtual Machine (EVM) environment has become the standard for dApps. This statement could be supported by the recent growth of liquidity on Binance Smart Chain (BSC) and Polygon, as both of those chains offer EVM compatibility while providing extra advantages over Ethereum, specifically better scalability and lower transaction fees.
Conversely, Solana operates separately by using Rust programming language instead of Ethereum’s Solidity to write smart contracts executed on the blockchain’s Low-level Virtual Machine (LVM). Due to its unique features, Solana is currently running nearly 900 transactions per second (TPS) with the potential to reach over 50,000 TPS (compare this to Ethereum’s 15 TPS). Notably, Rust is a popular language in the developer community, which makes Solana accessible to a wider pool of developers.
How to set up a Solana wallet
Let’s go over the setup process of Sollet – a beginner-friendly wallet that allows you to hold Solana and SPL tokens.
- Go to www.sollet.io and by default, it will create a new wallet. Make sure to save the 24-word seed phrase in a safe place and click ‘continue’.
- Next, encrypt your wallet with a password.
- Once the password has been set, click ‘create’ and the wallet will generate a new SOL (Solana) address.
- To add SPL tokens to Sollet wallet you need to buy some SOL first and send it to the Sollet SOL deposit address. Once you have deposited SOL, you can add SPL tokens. Just head over to “the popular tokens” section, and you will find the most used tokens in the Solana ecosystem, including SOL.
The wallet is connected to the Solana mainnet beta by default. Developers can switch to the devnet (developer mode), testnet, or localhost for testing purposes. It is also possible to connect using a hardware wallet.
Most Used Solana Wallets
Solana supports several types of wallets in its own command-line interface as well as wallets from third parties. The developer recommends using one of the app wallets or a browser-based web wallet since they provide a more comfortable user experience than using command-line tools.
Recommended mobile app wallets include the following:
Exodus – a multi-currency wallet that can hold more than a hundred different cryptocurrencies. Exodus differentiates itself from other wallets by focusing on those who have never used cryptocurrency before, featuring a user-friendly design.
Trust Wallet – a decentralized mobile wallet that provides a connection to various blockchains. Every blockchain has its own public address for encrypting and storing particular coins. The wallet gives a way for users to connect to the blockchain.
Atomic Wallet – a cryptocurrency wallet and trading platform with access to over 500 tokens and currencies. Its main highlight is an in-house decentralized exchange, Atomic Swap.
And here are some web wallet recommendations:
Phantom – a non-custodial Solana crypto wallet rethought for DeFi and NFTs with a straightforward and well-designed UX.
SolFlare – a local area non-custodial web wallet that was constructed specifically for Solana.
Sollet – a non-custodial web-based wallet that was created by the Serum Project for easy transfer of SOL tokens.
MathWallet – a wallet designed to transfer SOL and SPL Tokens.
Top new projects on Solana
Apart from the above mentioned low fees and fast transaction times, another factor that makes building on Solana convenient is that developers can download Solana’s software code straight from the Solana Lab’s Github and spin-up a node right away to start building Dapps.
At the time of writing, Solana accommodates nearly 250 different projects, from decentralized exchanges and wallets to NFT projects and DAOs. Below are some of the most interesting projects that are being built on Solana:
Serum – a high-speed, non-custodial decentralized exchange created on Solana. Unlike a simple DEX, Serum is a fully scalable matching engine that aggregates a whole ecosystem of interconnected exchanges.
Solana Beach – the official Solana Ecosystem’s tracking dashboard. Created by Staking Facilities, it offers insight into transactions, blocks, validators, various assets, and more.
Raydium – an automated market maker (AMM) and DeFi protocol made on Solana. It leverages the order book of the Serum Decentralized Exchange to enable fast trades and shared liquidity along with other features for earning yield.
Another project about to enter the Solana ecosystem is Orakuru (ORK). As specified by its whitepaper, Orakuru is a decentralized oracle network built with the goal of connecting on-chain smart contracts to off-chain real-world data. Specifically, it allows oracle nodes to act as intermediaries between smart contracts and outside information by processing on-chain requests for real-world data, translating and sending it to smart contracts in a seamless, verifiable, and trustless way.
Initially launched on Binance Smart Chain, Orakuru aims to become a cross-chain network because its developers believe in blockchain agnosticism – a concept suggesting that a single platform can manage multiple different chains. As part of that multi-chain approach, the Orakuru team is currently focused on expanding to Moonbeam, a parachain for Polkadot, and finalizing the necessary infrastructure for Solana.
Building lot for future DeFi projects
Solana’s future is looking bright, and the impressive price run-up we’ve been seeing this year is just a small bonus compared to the fundamental changes the project aims to deliver, like fixing the scalability issue without giving up security and decentralization. Given its rapid development and Rust compatibility, Solana seems like a good choice for developers who are looking to expand their DeFi projects to scalable, yet decentralized networks.
Create your free account to unlock your custom reading experience.